Thursday, July 31, 2008

U.S. Automakers in Perspective - GM, Ford, Chrysler, Toyota

On Wednesday, General Motors Corp. (GM) announced plans to cut 15 percent of its U.S. and Canadian salaried work force (5,100 jobs) as part of a plan to slash billions of dollars in costs and help the automaker deal with falling sales. This follows last week's news by Ford (F) and Chrysler to cut their salaried workforce.

Foreign car companies have been having issues too. Nissan North America Inc. also offered buyouts to around 6,000 salaried and hourly employees at its two Tennessee plants Wednesday. Toyota is keeping nearly 5,000 workers on the job despite U.S. plant shutdowns but has laid off only 700 temporary workers in recent months.

GM's cuts are part of a multiyear downsizing as the company struggles to adjust to its shrinking U.S. market share. GM had 44,000 U.S. salaried workers in 2000; that had dropped to 32,000 by the end of last year. The company's U.S. hourly work force dropped by more than half to 57,000 last year, and an additional 19,000 hourly workers took buyouts this month.  When will the cuts be enough?

The entire U.S. auto industry though is not being completely beaten up. Earlier this month, Toyota Motor (TM) announced plans to start building the Toyota Prius in a new plant in Mississippi in 2010. The Prius will join the Toyota Camry Hybrid (built in Kentucky) as the automaker's hybrid fleet built in the U.S. Toyota is not immune to the pressures of the declining U.S. car sales, but it has had a better solution over the past few years allowing them to take share away.

While the big three (GM, Ford, Chrysler) have been closing plants, Toyota has continued to expand its North American workforce and facilities. Toyota now has over 43,000 employees in 13 manufacturing plants in North America. Will Toyota continue its run? Time will tell.

One final thought is, when will Toyota be considered a U.S. or at least a North American automaker? While they obviously are based overseas, it is quickly becoming one of the best and most streamlined companies in any industry. The Big Three lost their competitive edge, and they fell behind years ago.

Toyota does not have the labor issues or "legacy costs" of any of the Big Three. The legacy costs of the Big Three include healthcare for retirees and pension costs, and at one point, every car GM made had legacy costs of close to $2,500. Toyota meanwhile has costs of healthcare and matching 401(k)s that amounts to about $300 per car. Big difference! GM has essentially a mini Social Security system issue with 2 current employees working to supply 5 retirees with benefits. Some of these items are and have been reworked, but it will continue to be an issue.

So while the Big Three continue to layoff workers, cut costs, and rework labor contracts (effecting morale), Toyota just keeps building a better quality, more fuel efficient, great looking product. Can the Big Three turn it around?

Source: Yahoo, Washington Post

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